Exit and Growth Strategies for Middle Market Businesses

Baby boomer business owners may be overwhelmed with information covering the dos and don’ts of prepping a company for sale. So to ease into the process, consider these 10 key value drivers before putting your business on the market.

Audit your financials. Sloppy numbers sap value like a poorly tuned engine saps horsepower. You may find a buyer who will overlook holes in your financial reporting, but you won’t get top dollar.

Fill gaps in your team. No one can do everything well – including you. If you can’t be away for a week without checking in on routine problems you need a stronger team.

Diversify your customer base. Customer concentration is a major knockout for sophisticated buyers. Ideally no one customer should represent more than 10% or 15% of your revenues.

Long-term contracts. Everyone knows it costs more to get a new customer than to keep an existing one. Buyers will pay a premium for a business with customers under contract and/or recurring subscription type revenues.

Build the product pipeline. If you want a buyer to pay up for the future, you need to give him a reason. Consider launching new products or entering new markets to show growth potential.

Make an acquisition. Buying another company is a big undertaking, but is often the fastest way to growth and a more attractive exit upon successful integration.

Create an exit plan. Often overlooked, sitting down with an investment banker and your other business advisors (lawyer, accountant, financial planner) to plan your exit in advance will eliminate confusion during the business sale process.

Get a realistic valuation. Your company will not trade at the same multiple as IBM, but it may be worth more (or less) than you think. Buyers will be armed with this information; to negotiate properly you should be too.

Get your records in order. Time speeds up the day you accept an LOI. Organizing your corporate, employee and customer records beforehand will help keep a deal on track.

Protect your IP. In our knowledge based economy, intellectual property is more valuable than ever. Catalog your processes, copyright your content and keep close tabs on your customer list to ensure you get paid properly for these valuable assets.

The Middle Market Pulse, an executive brief, provides M&A market insight for c-level management, shareholders and their professional advisors. To receive this free monthly report by email, please complete the following form: